Big Pharma Attacks Efforts to Guard Against Coronavirus Price Gouging

A coalition of conservative groups, many funded by the pharmaceutical industry, have attacked proposals aiming to ensure Covid-19 treatments are affordable.

Photo illustration: Soohee Cho/The Intercept, Getty Images

After House Democrats announced a plan to ensure that drugs and vaccines for Covid-19 are affordable and accessible to all, a coalition of conservative groups began quietly working to undermine that effort.

On April 15, Rep. Jan Schakowsky, D-Ill., along with Reps. Peter DeFazio, D-Ore., Rosa DeLauro, D-Conn., and Lloyd Doggett, D-Texas, laid out basic principles for the development and pricing of coronavirus therapies and vaccines. Their demands were simple: Pharmaceutical companies should have to set reasonable prices for their drugs and vaccines used to treat or prevent Covid-19. They should be required to make the costs of research and manufacturing of these products public. During the pandemic, the legislators said, companies should not be able to profit exclusively from these potentially lifesaving drugs.

“Exclusivity determines who has access, who can manufacture, and how we scale up production to meet the need,” the members of Congress noted in a press release at the time. “We cannot leave these decisions up to a single, profit-motivated private company.”

Few have spoken out against the protections that were designed to ensure equitable access to lifesaving medicines — at least publicly. But privately, a coalition of conservative groups attacked the proposed patient protections as “dangerous, disruptive, and unacceptable.” In a May 7 letter, representatives of 31 groups, including Hudson Institute, the Council for Citizens Against Government Waste, and Consumer Action for a Strong Economy, called on Congress to reject the drug pricing guidelines and defended patents and the exclusive right to profit from drugs as “America’s great assets.”

It’s worth noting that at least 15 of the groups arguing for the rights of pharmaceutical companies to exclusively profit from coronavirus-related products have received funding from the pharmaceutical industry. Among the organizations that signed the letter and also received donations from either drug companies or the trade groups that represent them are the American Legislative Exchange Council Action, whose parent organization, ALEC, received at least $530,000 from the trade group Pharmaceutical Research and Manufacturers of America, or PhRMA, since 2015; Americans for a Balanced Budget, which has received more than $375,000 from PhRMA since 2015; and the Institute for Policy Innovation, which received $374,500 from PhRMA during the same period. In all, 15 of the 31 groups received $2.5 million in pharmaceutical industry contributions between 2015 and 2019, according to an analysis of tax filings and other records by Public Citizen.

PhRMA, Hudson Institute, Council for Citizens Against Government Waste, Consumer Action for a Strong Economy, ALEC, Americans for a Balanced Budget, and the Institute for Policy Innovation did not respond to inquiries from The Intercept for this story.

The pharmaceutical industry, which spent $295 million on lobbying in 2019, far more than any other sector in the U.S., has defended the present system of drug development and pricing as an effective way of incentivizing needed investment in pharmaceutical innovation. Currently drug companies can obtain patents, which typically grant them 20 years of property rights. Separately, they can obtain exclusivity for their drugs, which can prohibit the sale of competing products. Either way, according to PhRMA, which represents biotech research companies, intellectual property rights are the key to the creation of needed drugs.

The May 7 letter argued that denying companies exclusive rights to profit from their products or requiring them to disclose proprietary information would benefit China and hurt people with Covid-19 and other diseases.

But according to Doggett, chair of the House Ways and Means Health Subcommittee and one of the authors of the guidelines, it is pharmaceutical greed that poses the real danger. “To know what interests these groups truly represent: Follow the money. Just like their generous campaign contributions, Big Pharma-funded propaganda seeks to protect monopoly power to extract the highest price — whatever the sick and dying will pay,” Doggett wrote in a statement emailed to The Intercept. “This letter only encourages continued inaction to protect the taxpayer investment from a Congress that has remained completely impotent in the face of Big Pharma.”

The April 15 guidelines, which have yet to be codified into proposed legislation, were not the Democrats’ first effort to guard against price gouging during the pandemic. In March, Schakowsky and others attempted to insert language into the coronavirus aid package that would have limited drug makers’ intellectual property rights and allowed the federal government to take action if it had reason to believe that treatments or vaccines developed with public funds were priced too high. But while an early draft of the bill included these provisions, lobbyists for the pharmaceutical industry succeeded in getting them removed from the final legislation.

Perhaps most galling to the Democratic lawmakers is the fact that the vast majority (if not all) of the drugs they seek to protect from exorbitant pricing have been developed at least in part with taxpayer dollars. Between 2010 and 2016, every drug approved by the Food and Drug Administration benefited from science funded with federal research through the National Institutes of Health, according to the advocacy group Patients for Affordable Drugs. During that time, taxpayers spent more than $100 billion on that research.

Although American taxpayers are the “angel investors” of pharmaceuticals, as Doggett put it, many cannot afford the treatments they’ve bankrolled. Some 58 million people in the U.S. reported being unable to afford medicines, according to a November 2019 Gallup poll, which also found that 34 million people reported knowing someone who had died after not getting treatment.

The problem isn’t new. “We have seen it time and again: The government does all the work through Phase III trials, and then licenses it over to a manufacturer to finish the approval. It is like those years of government investment did not exist,” DeLauro wrote in a statement to The Intercept. “As the Chair of the subcommittee that funds the National Institutes of Health and the Biomedical Advanced Research and Development Authority, I am all deeply aware of just how much money the U.S. government invests in the critical, life-saving biomedical research in this country.”

People with HIV and hepatitis C are also painfully familiar with the failings of the U.S. drug pricing system. Although medicines have become available over the past 10 years to treat these viral infections, tens of thousands of people still die because they are unable to afford them. “We have watched as those epidemics continue to spiral out of control and kill people,” said James Krellenstein of the PrEP4All Collaboration, a group that formed in 2018 to advocate for universal access to lifesaving HIV medications and expanded its work to include Covid-19 in February. “In both of these cases, we see we have highly, highly effective drugs in many cases funded by public money and we see drug companies pricing these as exorbitant prices.”

Some of the companies that are receiving government funding to develop coronavirus treatments and vaccines have offered assurances about their pricing. Stéphane Bancel, the CEO of Moderna, which received $486 million of federal funding to speed its work on a coronavirus vaccine, promised to be “very thoughtful” when it comes to pricing. And Johnson & Johnson, which received more than $600 million in federal funding for its coronavirus treatment and vaccine work, said that its vaccine, at least, would be “affordable.”

But Krellenstein said that leaving decisions about coronavirus drug pricing in drug companies’ hands — the approach taken with HIV and hepatitis C — would be a grave mistake. “We know from the past decade that the current approach of doing nothing results in the perpetuation of epidemics and the perpetuation of mass death,” he said.

In the case of remdesivir, an antiviral therapy made by Gilead Sciences that is being tested as a treatment for Covid-19, PrEP4All argues that because U.S. government scientists appear to have contributed in various ways to its creation, the government may actually co-own the patents. If remdesivir proves to be effective in fighting the virus, which is an open question, the group argues that the government could easily expand access to it.

Gilead donated its initial supply of the drug to the federal government and is now preparing to sell it. The company’s CEO Daniel O’Day told CNBC, “We understand our responsibility both to patients and also to shareholders and we’ll be balancing that.”

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Regardless of its ownership of remdesivir, the U.S. government has the right to override any patent as long as it provides the company “reasonable compensation” through a legal provision known as Section 1498. The law functions as a sort of eminent domain for patented products, allowing the government to break a company’s monopoly on a product and permit low-cost competition.

An increasing group of people could benefit from this and other steps to make Covid-19 drugs affordable. When Schakowsky and her colleagues first unveiled their proposal in April, there were just over 600,000 confirmed coronavirus infections in the U.S. By the time the pharmaceutical industry-funded groups sent their letter to House members, that number had doubled. Less than a month later, it has tripled to more than 1.8 million, and more than 105,000 people have died from Covid-19.

But U.S. lawmakers have yet to enact protections from price gouging. And while the American pharmaceutical industry is pushing to maintain its ability to exclusively set drug prices and profit from pharmaceutical products, much of the world is moving in the other direction. On Friday, the World Health Organization unveiled a global effort to pool intellectual property, data, and research related to Covid-19. While 36 countries have already announced their support for the project, the U.S. was not among them. Just as WHO was detailing its plan to broadly share the benefits of scientific advancement, President Donald Trump was announcing his plan to withdraw from the global organization.

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